Semiconductor market poised for 'rebound' in 2012

After several years of sluggish sales, the semiconductor industry is on the verge of a rebound, according to market research firm Gartner.

After several years of sluggish sales, the semiconductor industry is on the verge of a rebound, according to market research firm Gartner.

Gartner on Tuesday reported that worldwide semiconductor revenue is expected to reach $316 billion this year, a 4% increase from 2011. The new numbers are a marked improvement from Gartner's last forecast. In the fourth quarter of last year, analysts predicted a 2.2% increase for 2012.

"The semiconductor industry is poised for a rebound starting in the second quarter of 2012," said Bryan Lewis, research vice president at Gartner, in a statement. "The inventory correction is expected to conclude this quarter, foundry utilization rates are bottoming, and the economic outlook is stabilizing."

Gartner is predicting growth in several sectors of the market.

PC unit production in 2012, for instance, is projected to grow 4.7%, and semiconductor revenue from PCs will hit $57.8 billion, according to Gartner. Mobile phone unit production is expected to grow 6.7% with semiconductor revenue for mobile phones totaling $57.2 billion in 2012.

Gartner also noted that tablet production is expected to increase a whopping 78% over last year, and semiconductor revenue from tablets is expected to reach $9.5 billion in 2012.

"Unless we have a major world problem, like a war with Iran, the world economy is improving, and we have a massive number of buyers that have been holding back spending who are now opening their purse strings," said Rob Enderle, an analyst with the Enderle Group. "There will be some really interesting competitive drama between vendors but, overall, the chip market looks solid through mid-decade."

He also noted that as the industry ramps up for the highly anticipated Windows 8 launch, chip sales may dip in the PC segment as consumers and enterprises anticipate the new offerings.

"I expect the year to be up, but within it there could be a short-lived additional downturn," said Enderle. "But all segments are picking up. Tablet growth is increasing, smartphone growth is increasing and servers -- to address increasing virtualization and web-hosting needs - are trending up sharply. We also have a major push into the living room with massively enhanced set-top boxes and TVs that will push processors into a new segment."

However, Patrick Moorhead, an analyst with Moor Insights & Strategy, said he's optimistic about the chip market but still cautious.

"I'm cautious given the rising oil prices," Moorhead added. "While not directly related to oil, the more consumers are spending on gasoline, the less they spend on phones, TVs and computers."

However, he also said smartphones and tablets are bringing a lot of excitement to the market, and that could be enough to give chips a big financial lift.

"Over the next two years, barring larger oil issues or continued destabilization in the Middle East, I see a major chip resurgence," Moorhead said. "This buildout will be driven by smartphones, tablets, and the buildout of the supporting cloud infrastructure."

The optimistic news for chips comes after Gartner earlier this month reported that global PC shipments are growing but are expected to remain relatively week in 2012. However, Gartner analysts also noted that they expect 2013 to be a stronger year with shipments expected to hit 400 million units.